Janet Yellen on near term US monetary policy:
In her speech, Yellen notes:
“… we need to
keep in mind the well-established fact that the full effects of monetary policy
are felt only after long lags. This means that policymakers cannot wait until
they have achieved their objectives to begin adjusting policy. I would not consider
it prudent to postpone the onset of normalization until we have reached, or are
on the verge of reaching, our inflation objective. Doing so would create too
great a risk of significantly overshooting both our objectives of maximum sustainable employment and 2
percent inflation, potentially undermining economic growth and employment if
the FOMC is subsequently forced to tighten policy markedly or abruptly. In
addition, holding rates too low for too long could encourage inappropriate
risk-taking by investors, potentially undermining the stability of financial
markets. That said, we must be reasonably confident at the time of the first
rate increase that inflation will move up over time to our 2 percent objective,
and that such an action will not impede continued solid growth in employment
and output.”Update:
Bernanke on low interest rates:
http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low